World Bank-Backed Reforms Prompt Kenya to Embrace Market Prices for Corn Procurement

World Bank-Backed Reforms Prompt Kenya to Embrace Market Prices for Corn Procurement

Kenya is embarking on a significant shift in its corn procurement strategy, marking the first time in three years that it will purchase corn at market prices.

This departure from its previous practices is driven by the objective of fortifying its strategic reserves while fostering transparency and predictability in the agricultural market.

The reform aligns with funding conditions set by the World Bank under its development financing policy, as Kenya has tapped into this facility five times since 2019, receiving a total of $4.25 billion.

World Bank’s Emphasis on Competitive and Transparent Procurement

The World Bank emphasizes that Kenya’s planned corn procurement will be conducted competitively, reflecting prevailing market prices and encouraging greater participation from the private sector. Aghassi Mkrtchyan, the World Bank’s senior country economist, underscores the importance of this approach to enhance transparency and ensure that the agricultural market functions more inclusively.

Historically, the Kenyan government allocated resources to the Strategic Food Reserve Trust Fund to fund corn purchases at prices exceeding those offered by the market. Simultaneously, it sold maize to milling companies at discounted rates, creating disincentives for private sector involvement in maize storage, marketing, and value chain activities. This change in approach seeks to rectify such imbalances and stimulate private sector engagement.

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Potential Impact on Corn Prices and Output

Corn, a staple in Kenyan cuisine, has been a politically sensitive commodity, with the government vigilantly monitoring its cost and availability. The move towards greater private sector participation in the corn market could contribute to price reductions, potentially alleviating the sticky inflation that has persisted over the past year.

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Additionally, Kenya’s central bank forecasts a significant increase in corn output, projecting a rise to 47.8 million bags in the current year, compared to 34.2 million bags in 2022.